The ruling African National Congress is considering forming a second state-owned power utility to challenge Eskom’s monopoly in the country, says president Cyril Ramaphosa.
Ramaphosa was presenting at the South African Communist Party’s elective congress on Friday (15 July), News24 reports. The president said that establishing a new utility would help reduce the risk posed by Eskom’s failings.
He added that the proposal was originally made by Energy and Mineral Resources minister Gwede Mantashe after the power utility recently plunged the country into stage six load shedding.
“Eskom has been operating as a monopoly for over 100 years and having one company taking up the role of providing energy to the entire country poses a great risk. If it fails, its failure becomes a peculiar failure for the entire country,” he said.
“Look at China. It has a number of state-owned power providers who compete among themselves ensuring that the price of electricity is greatly reduced.”
Eskom poses a significant risk to South Africa’s economy and public finances, with the government guaranteeing as much as R350 billion of its debt. The utility has been intermittently cutting 6,000 megawatts from the grid since last month, leaving the country in darkness for hours at a time and further constraining industrial output and growth.
Ramaphosa is expected to address the nation in the coming days on his government’s new interventions around load shedding. It is not clear whether the formation of a new power utility forms part of the new interventions.
Something must be done
Business Unity South Africa (Busa) says it is standing by to rally its resources, skills and capacity to assist with the urgent implementation of focused interventions to address the energy crisis expected to be announced by the president over the coming days.
“The impact of the current load-shedding cycle has a significant impact on South Africa’s economy, its business community and its citizens. Busa is deeply concerned that if this is not remedied urgently, the country and economy will continue to be damaged by negative growth, further ratings downgrades and a deeper decline in consumer and investor confidence for many years to come,” the group said.
The apex business body says that while there has been good work done under Ramaphosa’s Operation Vulindlela to address the energy crisis, progress has been slow, and what is now required is the same sense of focus, urgency and collaboration that the nation saw during the national vaccine rollout.
“We hope that the president’s announcement will provide a clear path, with deadlines that demonstrate the urgency with which the proposed actions will be implemented,” said chief executive Cas Coovadia.
“Once it is announced, we would like to see a joint government and business working team configured and deployed to focus on delivering results against hard deadlines. This includes working towards deliverables that are communicated regularly, both to the President and to the public.”
The South African state power utility, which is R396 billion in debt, is separating into transmission, generation and distribution units that will operate as separate entities in a bid to improve its operational and financial performance.
The transmission unit, which will be the first business to be separated, will take control of employees, contracts and assets when all conditions are met including obtaining licenses from the national power regulator, Bloomberg reported.
South Africa’s labour minister said he’ll oppose any move to privatise Eskom as it struggles to produce power and get ahead of a mountain of debt.
Privatising the company would be detrimental to the poor, Employment and Labour minister Thulas Nxesi said in an interview.
While Ramaphosa’s government has previously denied any plans to sell the company, there have been calls to divest from the asset, Bloomberg reported. S&P Global Ratings said privatisation may be the best option to resolve the power crisis in Africa’s most-industrialized nation.
“I am not a proponent of privatization of key state assets,” said Nxesi, who’s also a leader of the South African Communist Party.
“If you privatise electricity, you can forget about the majority of people having access to electricity, it is going to be very expensive for them. That’s why government steps in when there is market failure.”
Read: Eskom announces load shedding changes for the weekend – here is the new schedule